Stocks slide again as investors fear Europe has no quick fix for debt crisis

File photo / Associated PressA customer shops at a Target store in Mountain View, Calif. Target Corp. reporting an almost 29 percent increase in net income for its first quarter Wednesday, fueled by an improvement in its credit card business and higher sales of more profitable items such as clothing.NEW YORK – Another wave of selling hit stocks Wednesday in response to growing fears that Europe has no quick fix for its debt crisis.
The Dow Jones industrial average fell about 67 points after having been down as much as 186.
The extent of investors’ worries became clear after the euro bounced off a four-year low but stocks still fell. The euro has been driving stock trading for weeks.
The Standard & Poor’s 500 index, widely considered one of the best measures of how the stock market is doing, neared a 10 percent drop from the 2010 trading high it reached last month. That would mark the first time the market has had what’s known as a “correction” since it bounced off a 12-year low in March last year. Most analysts say a correction is a drop of at least 10 percent.
The latest worry came from Germany, where regulators banned what’s called naked short selling. That occurs when traders bet against investments they don’t hold. The rule covers European government bonds, credit default swaps and the shares of several financial companies.
The sudden announcement late Tuesday from Germany’s financial regulator was seen in the markets as another example of disarray in Europe’s financial system. Analysts said the hasty move only deepened the uncertainty about what steps governments might take next in hopes of containing the selling. Major European stock markets tumbled nearly 3 percent.
Maury Fertig, chief investment officer at Relative Value Partners, in Northbrook, Ill., said memories of the market’s crash in late 2008 and early 2009 are still raw and that traders don’t want to be caught when stocks start to slide.
“It’s shoot first, ask questions later,” Fertig said. “The freshness of the pain of 2008 is still really stuck in investors’ minds.”
Germany enacted the short-selling rule in hopes of curtailing sudden swings in European debt markets, like the ones that crippled Greece’s ability to borrow money after the rates on its bonds shot higher earlier this year.
European leaders agreed last week to a nearly $1 trillion bailout program to help countries like Greece that face mounting debt problems. The deal was initially embraced by financial markets, but traders quickly became concerned that the austerity measures tied to the rescue package would upend a rebound.
“People are still just very concerned about what’s going on overseas,” said Sam Stovall, chief investment strategist in U.S. equity research at Standard & Poor’s.
According to preliminary calculations, the Dow fell 66.58, or 0.6 percent, to 10,444.37 after dropping 115 on Tuesday.
The S&P 500 index fell 5.75, or 0.5 percent, to 1,115.05. At its low Wednesday, the index was down 9.8 percent from its 2010 trading high.
The Nasdaq composite index fell 18.89, or 0.8 percent, to 2,298.37.